How Would White House Shift Impact Dodd-Frank?

On the campaign trail, President Barack Obama and Republican challenger Mitt Romney couldn’t have a bigger difference of opinion when it comes to the Dodd-Frank Act.

Romney said during the Oct. 3 debate he would repeal and replace Dodd-Frank and has mentioned the legislation hurts small banks. Obama has said he will continue implementing Dodd-Frank, including rules from the Consumer Financial Regulation Bureau that have cost credit unions resources.

So, should credit unions overcome with regulatory burden hope for a Romney victory that would turn back the clock on Dodd-Frank?

New York-based Mayra Rodriguez Valladares, a consultant and Basel trainer in the financial industry who has worked with several federal regulators, said Romney could attempt to work with the Republican-controlled House of Representatives to amend certain provisions of Dodd-Frank.

The CFPB would be a big target, Valladares said. However, neither Romney nor Obama probably wouldn’t get very far.

“If they try to gut out the CFPB, [Senate Majority Leader Harry Reid (D-Nev.)] and the Senate would put a stop to that,” she said.

If CFPB champion Elizabeth Warren wins her Senate bid in Massachusetts, she could be a leading voice in the Senate for supporting and defending the consumer protection agency, she added.

Dodd-Frank probably wouldn’t be a top priority for Romney, anyway. Repealing Obamacare would take priority, Valladares said.

“Plus, the reality of it is there are a lot of Americans frustrated with stalemate in Washington and no jobs, so his priority will be to create jobs rather than eliminate laws.”

However, Valladares said because credit unions are critical to so many communities, the industry has power to seek help from Congressmen to get lighter treatment. Because mortgage issues were the backbone of the financial crisis, however, she said those revisions are unlikely to be repealed.

Andy Greenawalt, CEO of the New Haven, Conn.-based bank compliance software firm Continuity Control, said regulation isn’t partisan, it’s cyclical. The low point in the cycle is 100 new regulations per year and the high point is 300.

“But nowhere do we go retrograde,” Greenawalt said.

According to data provided by Greenawalt, Democrat President Clinton slowed the speed of new regulations during his two terms, and although new regs bottomed out at the beginning of Republican George W. Bush’s second term, the pace had increased dramatically by 2008.

Greenawalt agreed that repealing Dodd-Frank wouldn’t be at the top of a President Romney political agenda because it doesn’t have sufficient political imperative to draw his attention.

“He has to get the economy moving and this doesn’t seem like it would move the needle,” he said.

The CFPB is also popular with consumers and will continue to build popularity as financial transparency improves and consumers wronged by big lenders receive payback collected by the bureau, he said. Regulators have historically been industry focused, but the CFPB has its focus on “we the people,” which will resonate with consumers, he added.

Greenawalt’s business is in providing technological solutions for regulatory burden, and he said he doesn’t see the pace of new regulations slowing. To maintain viability, credit unions must find ways to make change cost less, he said.

If Congress is successful curbing the CFPB’s powers, it may be NCUA Chairman Debbie Matz who provides some relief through her vote as a member of the Financial Stability Oversight Council. The only check on CFPB’s power is the FSOC’s ability to veto CFPB actions with a two-third vote. However, to be put up for a vote, the proposed action must seriously threaten the safety and soundness of the American financial services system.

In 2011, Rep. Sean Duffy (R-Wis.) sponsored a bill, H.R. 1315, that would reduce the required FSOC veto vote from two-third to a simple majority and soften the safety and soundness threat threshold to one that is inconsistent with safety and soundness. Duffy’s bill passed the House July 21, 2011, but a companion bill was never introduced in the Senate.